The anticipation was great and the joy even greater when a large part of the hitherto state-controlled “Federal Post”, which concerns telecommunications, was privatized, to be listed on the stock exchange and to seek resources from private investors. In Europe it was a time of euphoria in the stock markets. But Deutsche Telekom’s stake would be more than a gamble. It would be a genuine “share of the people”, which would lead Telekom to new avenues of success, but also to small investors in valuable, almost guaranteed savings. Some made connections with the “people’s car”, the famous Volkswagen.
Deutsche Telekom’s advertising campaign starring actor Manfred Krug, one of the biggest stars of the show at the time, was also particularly successful. Krug became a television idol in the Liebling Kreuzberg television series as a demonic lawyer devising solutions to all problems. “Telekom goes to the stock market and I go with it” was Krug’s simple but comprehensive message to the television audience. On November 18, 1996, when Deutsche Telekom’s stock first appeared on the stock exchange, 1.9 million investors – including many small investors – rushed to “buy”. The euphoria exceeded all limits, the stock broke all records and around 2000 it reached the mythical price of 103.50 euros,
Headache after the … party
But the frantic party ended at some point and, as often happens in big parties, the next day caused many shareholders a strong … headache. Shares of Deutsche Telekom began to decline steadily, never to recover. Today it is priced at around 17 euros, which is not far from its initial price on the stock exchange in 1996, which was 28.50 German marks. Many investors have lost their money.
It all started in the mid-1990s, when the Internet began to spread widely. Deutsche Telekom executives called it an “information boulevard”, wanting to emphasize its importance for the future. The peculiar magenta red color of the company, which is preserved to this day, also symbolized the “turn to the future”. Under Ron Zommer, Deutsche Telekom needed billions of shares of the stock market to finance its expansion abroad. So she created her American subsidiary, which to this day remains the “diamond” of the group, contributing valuable revenue.
Misleading advertisement;
In order for all this to happen, Deutsche Telekom’s share had to be embedded in everyone’s consciousness as the “people’s share”, as it did. Police officers, firefighters, fishermen, retirees and generally people who until then had nothing to do with the stock market appeared in Deutsche Telekom commercials, smiling happily at the camera. Mark Tingler, head of the German Association of Shareholders and Small Investors (DSW), criticizes this tactic: “The state gave the impression that it was a ‘safe’ share for everyone, which was not the case. Obviously there were risks, when in fact Telekom was already heavily indebted and did not know the foreign markets to which it wanted to expand. We would need more restraint in these ads … “
At the time, most were unaware of the dangers of the stock market. Many small investors, in particular, trusted their savings in the Deutsche Telekom stock, believing it to be a safe bet, but were surprised when the stock began to collapse. After the first listing, in 1996, Telekom continued to raise funds and listed two other major stocks.
The courts have the floor
But the second and – even more – the third listing on the stock exchange, in the year 2000, had consequences. In a group action, 16,000 small investors went to court, demanding compensation. A final decision has not yet been issued. However, in 2014 the German Supreme Court for Civil Cases (Bundesgerichtshof) ruled that there was an “error” in the information of investors about the package of shares listed on the stock exchange in 2000. Specifically, the judges ruled, the registration was based on the 1999 balance sheet , which had profits of 8.2 billion euros from the sale of the American mobile phone company Sprint, which, however, was not actually sold, but was part of the portfolio company NAB, which was owned by Deutsche Telekom. And yet, in flyers to potential investors, Telekom advertised, among other things, the proceeds from the sale of Sprint.
The Court concluded that the directors of Deutsche Telekom had intentionally distorted the financial information. However, the “causal link” between this alteration and the financial losses of the shareholders has not yet been clarified, as a result of which the legal dispute continues. In February, the Supreme Court remanded the case to the Frankfurt Court of Appeal. The interested parties will meet again in court on November 23. They are also expected to discuss an out-of-court settlement proposal. In the long run, however, the whole affair had consequences for the stock market itself. “25 years after Telekom’s first acquisition, we still see very few Germans investing in stocks,” said Mark Tingler. “Only in recent years has a new generation of investors seemed to focus on the stock market again.”
Christine Bortnlinger, head of the German Stock Institute, which describes itself as the “voice of the capital market”, sees things differently. In its view, the entry of Deutsche Telekom into the stock market was a “milestone”, because it gave the opportunity to attract, for the first time, millions of people by investing in shares. Beyond that, he argues, one should not only look at the course of the stock, but also the high dividend for those who made a profit. This is exactly the argument of Deutsche Telekom itself. “Private investors who bought Telekom shares in the first subscription and have kept them to date, have secured profits of over 200%,” said a company spokesman. However, according to the German News Agency (dpa), Deutsche Telekom executives later estimated that “the stock market was not good” at a time when the new technology bubble was raising the share prices of the industry, for to be followed by the collapse a little later. “Some people have confused us with short-lived ghost companies, something we never wanted,” said a Deutsche Telekom manager, who spoke on condition of anonymity.
DW / Wolf von Devic, dpa / Editor: Giannis Papadimitriou
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